Canada: FMC’s Overview of Significant Developments in the Canadian Energy Industry - December, 2005

Last Updated: January 31 2006

Article by Doug Black, Q.C., Bill Gilliland, Nick Kangles, Alex MacWilliam, Miles Pittman, Francis Saville, Q.C. and Karim Mahmud

Alberta Oilsands News

Enbridge has commenced construction of its $1.2 billion Southern Access pipeline expansion project. The expansion will boost capacity of synthetic crude on the current 2 million bpd system by 400,000 bpd by 2009. In addition to capacity increases, the expansion will extend the reach of the current pipeline to southern Illinois and Cushing, Oklahoma. Work on the expansion will start immediately, with capacity increases commencing in 2007. (See number 1 on map.)

Petro-Canada announced plans to spend up to $810 million to more than double production of synthetic crude at its MacKay River oilsands facility, located about 45 kilometres (28 miles) north of Fort McMurray. The plans include construction of a cogeneration electrical plant which will produce both power and steam. The expansion will result in a boost in production from the 30,000 bpd forecast for late 2006 to 70,000 bpd by 2012. (See number 2 on map.)

Husky recently announced that its Sunrise oilsands project has received regulatory approval from the Alberta Energy and Utilities Board. The $500 million project will be developed in 50,000 bpd phases starting in 2009 and is expected to reach a peak operational capacity of 200,000 bpd of raw bitumen. Sunrise will use steam-assisted gravity drainage to recover the bitumen. The project, which is located approximately 60 kilometres (37 miles) northeast of Fort McMurray, covers 57,634 acres in the Athabasca oilsands, and contains approximately 3.2 bbbl of recoverable bitumen. (See number 2 on map.)

Synenco announced plans to build an upgrader northeast of Edmonton that will process raw bitumen from its proposed $5.3 billion Northern Lights project. The upgrader will be built on 1,264 acres of land in Sturgeon County. When fully operational, the Northern Lights project is expected to produce 100,000 bpd of light sweet synthetic crude in two phases, beginning with 50,000 bpd by late 2010 and an additional 50,000 bpd by late 2012. (See number 3 on map.)

West Coast News

Kitimat LNG announced it has reached a tentative agreement with the Haisla First Nation, which the company said is the first step towards construction of its proposed $500 million liquefied natural gas ("LNG") receiving terminal in Kitimat, British Columbia. The company noted that while there are many proposed LNG facility sites along the west coast, Kitimat LNG’s agreement with the Haisla increases the company’s potential to be the first project to market. (See number 4 on map.)

Keyera Facilities Income Fund announced that it has started construction of its Caribou North Gas Gathering System pipeline. The 6-inch diameter pipeline will transport sour gas from northeast British Columbia to Keyera’s Caribou gas plant. To accommodate the additional gas, Keyera also announced that it will expand the gas plant’s capacity from 25 mmcfpd to 65 mmcfpd by mid 2006. Gross capital expenditures on the project will be approximately $21.5 million. (See number 5 on map.)

Canadian Arctic News

The National Energy Board’s regulatory hearings for the $7 billion Mackenzie Valley pipeline project will begin in Inuvik, Northwest Territories on January 25, 2006. The environmental joint review panel will start its portion of the hearings in Inuvik on February 14, 2006. The Mackenzie project involves a 1,350 kilometres (840 miles) pipeline along the Mackenzie River valley to Canadian and U.S. markets that would ship up to 1.9 bcfpd. The project has been in the works since the 1970s when three large gas fields were discovered in the Mackenzie Delta region. (See number 6 on map.)

Assuming regulatory approvals are given by the third quarter of 2007, the major pipeline and facilities work will likely begin in the winter of 2008 to 2009. In this case, natural gas could be flowing down the pipeline in late 2011. The natural gas resources that ultimately might supply the pipeline have been estimated as 67.9 tcf of marketable resource, of which 11.5 tcf has already been discovered.

East Coast News

Husky has announced that it received the first shipment of crude oil from the White Rose oil field. The field commenced production on November 12, 2005. The first oil was delivered to Irving Oil’s Canaport terminal near Saint John, New Brunswick. The first shipment included a cargo of approximately 600,000 bbls of crude oil, shipped from the White Rose field, 350 kilometres (217 miles) east of Saint John’s, Newfoundland and Labrador. The White Rose field is currently producing 75,000 bpd. In 2006, Husky plans to spend $350 million on the east coast offshore, including drilling and completing a fourth production well on the White Rose field that is expected to boost production to a peak of approximately 100,000 bpd by mid-2006. Husky also plans to drill a delineation well to further define reserves in the North Avalon pool, adjacent to the South Avalon pool of the White Rose oil field. Husky owns 72.5 % of the White Rose project and is the operator. Petro-Canada holds the remaining 27.5 % interest. (See number 7 on map.)

Corridor Resources has announced promising results of initial flow tests in the McCully field in New Brunswick. As a result, the company is looking to proceed with applications to the New Brunswick government and Public Utilities Board for approvals to construct gathering lines, a gas plant and a 48 kilometre (30 mile) pipeline to connect the McCully field with markets in New Brunswick and New England through the Maritimes and Northeast pipeline system. The McCully field is located near Sussex in south central New Brunswick and is estimated to contain more than 1 tcf of gas in place in the Hiram Brook formation. Since April, 2003, two wells have been on production, supplying natural gas at an average of 2 mmcfpd to a local market. Corridor expects to be flowing natural gas to the Maritimes and Northeast pipeline system by the end of 2006. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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